Lessons in Humility & The Wall of Worry

The Market is a great teacher. As soon as a trader develops a sense of over confidence, Mr Market comes and puts the trader in his/her place.

Silver broke out of a trading range yesterday, giving a buy at 54785. I went long, then added to this position when Silver dipped to 54300. Then, in the evening, Silver broke out above its resistance at 54860. So, I added some more. I felt that the breakout in Silver is finally at hand. This is likely to be a profitable trade – which is what came to my mind.

Pleased with my trading skills, I went for my evening walk. I do not take any trades (entries or exits) after 9 PM. At 9.30 PM, I switched on the screen just to find out how much money I was making. Silver was at 54000.

As I said in the post heading, every day in the market is a lesson in humility.

 The Wall of Worry

Adapted from A Dash of Insight

Selected Quote:

Investors, business leaders, economists – Most of them feel more confident about their personal circumstances, but they are worried about everything else.  When it comes to the stock market, the fear is palpable.

The single biggest source of investor profit relates to evaluating what many call “market fundamentals” and others call “headwinds.”
Readers should note that worries and headwinds are not quantified.  Anyone can deal in words and anecdotes.  It requires some expertise to include data.  Those of us who have been data-driven have beaten the anecdotal crew by a wide margin.

If you are an investor who is not mesmerized by fear, you will be able to join me in doing two things:

1. Finding stocks that  have strong anticipated earnings and cash flow.
2. Finding stocks with strong dividend yield.

The Wall of Worry is a difficult concept to explain, and even tougher to appreciate in real time.  The daily stories seem so tangible — often augmented with TV video.
UnQuote

My Notes:
Investors who can identify the wall of worry should make above average profits buying when everyone is ‘worried’ with shares available at below normal prices.
Are we in India currently facing such a wall? Technical Traders like me, base our buy and sell decisions on hard, tangible charts and not on ‘what I think may happen’. As of now, long term charts are NOT bearish. This may change, but I am describing the current scenario.